The dynamics of market efficiency of major cryptocurrencies

Faheem Aslam, Bilal Ahmed Memon, Ahmed Hunjra () and Elie Bouri

Global Finance Journal, 2023, vol. 58, issue C

Abstract: The exponential growth of Fintech innovation has increased the interest in cryptocurrency market informational efficiency given that cryptocurrencies and their underlying blockchain technology represent a profound yet ambiguous facet of Fintech. In this context, this paper examines the dynamic changes in the market efficiency of six major cryptocurrencies using the multifractal detrended fluctuation analysis (MFDFA) approach. The empirical findings confirm a varying degree of multifractal strength in the cryptocurrencies under consideration, which could be related to market inefficiency and fractal market hypothesis verification. Based on the multifractal indices, Bitcoin and Litecoin are the two most inefficient cryptocurrencies, whereas Cardano and Binance Coin exhibit the least inefficiency. Ripple and Ethereum remain in the middle. Overall, the cryptocurrencies exhibit persistence behaviour but show a significant change over time. Finally, we perform a rolling-window analysis and confirm the presence of multifractality, which seems to vary over time, suggesting that market (in)efficiency is an evolving process that can be shaped by market conditions. We argue that these findings could be related to herding behaviour, especially during crisis periods. The findings have policy implications, including the possibility of using active trading for profit-making strategies.

Keywords: Cryptocurrency; Market efficiency; MF-DFA; Rolling window; Herding behaviour; COVID-19 outbreak (search for similar items in EconPapers)
JEL-codes: C10 C32 G10 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1044028323000947
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:58:y:2023:i:c:s1044028323000947

DOI: 10.1016/j.gfj.2023.100899

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().